The New Zealand Refining Company may spend up to $500 million on an expansion project, which could employ up to 300 people at the peak of construction.

The Marsden Pt refinery company said it would spend $23m in the next year working on the proposal for a large expansion, before making a final decision on the project, which could then take three years to complete, by early 2016.

In the past few years, the company spent $190m on another expansion project, lifting capacity 20 per cent. While already dominant making jet fuel and diesel, the refinery only produces about half New Zealand's petrol for vehicles. The new giant project on bare land at the existing refinery could cause that share to rise to almost 80 per cent.

NZ Refining yesterday posted a much improved $57.7m annual net profit, up 145 per cent on the previous December year's dismal result. However, the latest profit is well below the $112m in 2007 and $135m in 2006.

The company's profit margin jumped from US$1 a barrel in 2009 to an average US$6 a barrel last year, and it is now tracking above that.

However, chief executive Ken Rivers said the rising profit margin did not add to the retail cost of petrol, which has just hit $2.03 a litre, up 29c a litre since September. "That [rise] is a reflection of the absolute rise in crude oil. Refiners' margins are on the edge – the difference between the price of crude and refined product."

Crude was at more than US$100 (NZ$133) a barrel.

"The variations in refiners' margins are tiny compared to the absolute numbers in the crude price."

Petrol prices were rising because of higher world demand, not rising refiners' profit margins.

The listed refinery firm is controlled by the main petrol firms.

The $400m to $500m expansion project, if it proceeded, would not change New Zealand's fuel prices, Mr Rivers said. "If I'm going to be New Zealand's supplier of choice, I have to be more reliable and cost-effective and competitive than [petrol] imports, and with a lower environmental footprint."

The refinery company posted a 10c a share final dividend, after not paying a dividend last year. NZRC's shares fell 10 cents to $5 yesterday, but are well up on last year's trough of about $2.75.

The increased profit reflected a big rebound in refiners' margin, which plunged in 2009 after the global financial crisis. Margins are now back to US$6 to US$7 a barrel for the refinery, as demand lifted in China and India, and the global economy improved.

"The margins [now] are not as good as they were between 2004 and 2008 – these margins are healthy, but I'm not ecstatic about them," Mr Rivers said.

Potential "always" existed for margins to lift further, but it was not willing to make a forecast.

"We are making hay while the sun shines."

The strong profits allowed the company to reduce debt more than $100m to about $86m.

With strong profits at present, the refinery did not expect to ask shareholders for money to help pay for the possible $400m to $500m expansion project, but would borrow from banks.